Tag Archives: personal finance

I used to be afraid of debt. Now I understand how to use it to my advantage

USING DEBT TO GET AHEAD

I was super lucky to sidestep the burden of student loans. Thank you, scholarship! I’m getting to the age where a few people are starting to clear their student debt, but I’d say the majority are still paying theirs back.

I’ve always been debt averse. I’ve never really bought anything I couldn’t afford, and have avoided going into consumer debt.

(Granted, I have carried a balance on my credit card during some of the super fun times of unemployment and being down to one income. Paying that interest sucked – they were small balances of a couple grand but still. That shit stressed me out.)

Using debt to get ahead

We paid for all our cars in cash. But unfortunately that never turned out too well for us, because we couldn’t afford very good vehicles.

For this car I took out a loan and paid it down aggressively, eventually pulling from savings to pay it off  in full 9 months in. This saved so much stress and at the end of it we have a reliable paid off car that should have years left in it (touch wood).

And after years of enduring substandard NZ rentals, I have bought a house of my own and am already enjoying the benefits. The peace of mind that comes with the stability of owning is priceless; I am finally able to own a dog; and I’ve noticed my health is better now I have a warmer, drier home environment. This means I can be more productive – not to mention be taken more seriously as a professional when I don’t have a constantly literally dripping nose through winter and sniffles year round.

I don’t expect interest rates to stay this low so I’m directing extra money to the mortgage where I can – early repayments at this stage have a massive impact on the long term total cost.  Reaching retirement with a paid-off home will be a big win.

Going into debt as a calculated move has been one of the best things I’ve ever done. I’d probably be better off had I done so sooner.

Debt is debt and I still hate it – but money is a tool and debt can be too, done right.

In an ideal world nobody would ever need to borrow money (and we’d have 0% unemployment, poverty, homelessness etc…).

Sadly, that’s not the world we live in – and if we do need to borrow money then the key is to do it wisely.




How I doubled my pay and halved my stress

How I doubled my pay and halved my stress

Since graduating with my degree, I’ve managed to double my pay. Most of that growth has happened in the past couple of years, thanks to two strategic job moves. Here’s the process I went through.

I realised it was time for a change

It’s a long running truism that you don’t go into journalism for the pay. Young, energetic and idealistic, we rushed into the trenches with shining eyes and grand notions.

It’s thankless in those trenches. The work never ends. You’re constantly being forced to do more with less. Media organisations keep cutting back; the whole industry is struggling to find a sustainable model.

I loved my job, but it was tough. When I took a six-month sabbatical, the person covering for me quit after just a few weeks. For what it’s worth, I’d always worked at that pace and this was a bit of an awakening. It really did get me wondering what a normal workload outside of publishing might feel like.

When I started thinking about my next move, I looked around and saw no opportunities in journalism that excited me. Forget advertised positions; even just considering what roles existed and were currently filled, there was nothing that spiked my interest. Nothing I wanted to aspire towards.

And just as importantly, I saw little opportunity to increase my income. I was getting by fine, but in order to get ahead, or to afford a family or a halfway decent place to call home, I had to make a change.

I assessed my transferable skills

I took the skills I had and started applying to jobs outside of publishing. The decline of journalism has led to lots of new opportunities in all kinds of companies – as content marketing grows, editorial talent is in demand on the brand side. (The typical trajectory for ex-journalists is to head into PR or communications, but you could not pay me enough to do media relations.) They need people who can write, understand their audience, and manage digital channels.

I researched salaries as best as I could

I talked to people. I looked at salary surveys. I spent time on TradeMe and Seek just playing around with the filters and seeing how the results changed when I altered the salary band in my search parameters. (This works for real estate listings, too. In both cases you typically won’t see a number listed outright but you can use the filters to see when listings disappear from the results and make an assumption about the range based on that.)

I sucked it up and negotiated

Full disclosure: it took me until my fourth job to actually negotiate for the first time.

In Job 1 I was on union pay rates. My hourly rate wasn’t very high. But a few months into the job I accepted a change in duties that had me working weekend shifts. As a result, I actually took home something like 40% more than that every pay day unless I had a weekend off.

In Job 2 I was willing to effectively take a small pay cut for better hours, (though technically my actual base rate was higher).

In Job 3 – my first outside of journalism – I had every intention of negotiating. But the application form asked for a salary range and I was afraid to leave it blank. They offered me more than the figure I wrote down, and more than I would have even dared to expect, to the tune of a 25% effective increase. And so, I didn’t negotiate further. But this was a real eye opener. There was money to be made! My skills were valuable in the marketing world!

In Job 4 I negotiated and received the exact salary I wanted – a 25% increase again. Boom.

In hindsight

Life after journalism is sweet. I’ve been picky about the organisations I apply to and the kind of work I want to do – and as as a result I find even more meaning in my job now. Plus I’m better resourced to do it (though of course, as is the way, there’s usually still too many ideas and too much to do compared to actual capacity). I’ve been able to save more and start to build wealth. And that is incredibly important to me.




Does your budget reflect what you value?

Does your budget reflect your values?

“Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”

Everybody does money differently – we all have our own way of approaching things. But ultimately the key to happiness is spending in line with our values.

There are infinite things I could spend money on. Being mindful about my money and where it goes – specifically, spending it on things that enrich my life – gives me immense satisfaction.

I don’t really drink; I don’t have a clothing budget. Here’s where the bulk of my budget goes.

A home environment I love

For me, that’s an Auckland-sized mortgage in order to live in the city I love and grew up in. To have a dog I love. To live in a home free of mould and mushrooms, where I can literally breathe easier. Surprise: warm dry air is a lot better for you than cold wet air. (Sure, theoretically it’s possible to achieve the latter while renting, but quality rentals are rare and expensive and the market is competitive. At that kind of price to me it made more sense to buy – even in a less central location – and pay the premium of rates and maintenance in exchange for long term security and quality.)

Food­­ that makes my tastebuds tingle

Eating out is our main form of entertainment, but we don’t do that very often either. Quality not quantity (although we do tend to do at least one weekend bakery breakfast run). I buy cheese and dips and olive oil with minimal guilt and don’t fret too much at the supermarket checkout till.

Travel and getting away

At this point in time I’m not specifically saving for travel. I’m more than happy just to burrow in at home since buying a place. But at some point a holiday will definitely be in order – I’m just not sure where in the pecking order it will fall as a financial priority just yet. I’d like to do another South Island road trip; visit Melbourne and the Gold Coast; and head back to the US to places both new and old.

How does your budget stack up against your values?

Disease Called Debt

What to think about when buying appliances

Dream kitchen
I wish…! By: WalkingGeek

Recently I attended a focus group where we got to talk about shopping. Specifically, shopping for whiteware. Although my experience with buying appliances has been pretty dang limited to date, I anticipate buying a crapload of them in the next 1-2 years as a freshly minted homeowner.

The only new appliance I’ve ever purchased was our Samsung washing machine in early 2015. Aside from that, I’ve only ever bought cheap secondhand washing machines and fridges at a pinch, when our old one died or a house move forced a change of some sort.

In that session, we discussed things like brands, reliability, efficiency, design, functionality, upfront cost and running costs. In particular, when it makes sense to go for the option with a better energy rating, whether it’s worth calculating annual running costs, calculating the break even, etc.

Being a broke student and then a broke journalist for most of my adult life, upfront cost was always paramount. Not only did I have a limited budget, I never knew what the future held or how long I would need that appliance for. Efficiency and the longer term view just didn’t play into it then. The ability to be pound wise rather than just penny wise assumes a certain level of privilege.

A new kitchen is in my future at some point – a fridge, rangehood, stove/oven and definitely a dishwasher. I want a gas stove for sure, but efficiency will be a consideration for the fridge and dishwasher.

Have you renovated a kitchen? What do you take into account when buying appliances?

 

What’s your latte factor?

What's your latte factor?
By: Kenny Louie

I really hate the ‘latte factor’.

We were talking about this at work the other day, and I pointed out that I don’t drink coffee, so it’s an instant turn-off.

‘So what would you cut back on?’ I was asked.

Truth is, I don’t have an equivalent. I don’t regularly spend on anything. I don’t have anything I could easily or obviously cut back on like a daily coffee. Most of my days are no-spend days.

For me, it’s always been about the infrequent but big ticket buys. Mostly travel, with a bit of a concert-going phase.

What’s your poison?

What happened when I got my first ever collections call

What happened when I got my first ever collections call

I don’t love answering calls from unknown numbers, especially now I’m out of journalism and don’t feel obligated to pick up every incoming call. But often these mysterious calls are from one of the market research groups I belong to and HELLO free money!

This was a different kind of call, though…

Debt collections calls … sound surprisingly scammy

I thought it was some kind of weird phone based scam at first.

As soon as I put the phone to my ear, I heard an automated message start repeating itself. This soulless robotic voice told me I had to stay on the line for a very important matter to do with Dun and Bradstreet.

WTF? I was tempted to hang up, but I stayed on hold. After a few minutes that felt like an eternity, a human came on the line. She started asking me personal questions to verify my identity and to be honest, I still wasn’t sure this was a legit call. But reluctantly, I confirmed a few details, trusting that they were who they said they were (seedy automated call aside).

Long story short: they told me I had a $50 ACC debt that had just gone to collections. Except I had literally never received any notification of this at all. Apparently it had gone to a very old address from about 3 years and 3 houses ago. And as I told the rep, I am always careful to keep my details up to date with the government (through IRD, because taxes!) and if I did owe this debt you’d think they’d tell ACC where to find me. Also, I’m not self employed, so I don’t know why I would owe ACC anything at all.

Without proof of this alleged debt, how was I even meant to begin sorting this out? Seeing as I had literally no documentation relating to this alleged debt I asked them to send me whatever they had on file.

A few days later I got a lovely letter full of capitals and red and threats of legal action. Standard template, I’m sure. It wasn’t exactly proof of the original bill, but it was something at least.

Armed with a reference number and a dollar amount, I contacted ACC. A couple of days later they told me they would be withdrawing the debt from Dun and Bradstreet. Sweet, I thought – that puts an end to this saga.

Debt collectors are relentless

Of course it wasn’t that easy. I continued to get calls from unknown numbers during the weekday and in the evenings – many of which I missed, and the rest I actively ignored. Then they started texting… Seriously.

I forwarded my email from ACC to three separate email addresses I found on the Dun and Bradstreet website (two of which immediately autoresponded with out of office replies).

Then, I also emailed ACC back to see what was happening…

Bureaucracy reigns supreme

Dun and Bradstreet eventually responded, only to tell me that a) I needed to call ACC because b) they had just spoken to their contact at ACC, who had said there was no intention to withdraw the invoice and c) it remained outstanding at this stage.

Uh, NOPE. I’m not going to waste time on the phone, particularly when that does not generate a paper (or email) trail. A lack of documentation is what brought this whole mess about.

Then, I heard back from ACC again. Another email saying the invoice had been withdrawn from Dun and Bradstreet…

The calls seem to have stopped, so I am assuming the message has finally gotten through to the right people.

It’s a stressful and dehumanising process

Look, I know Dun and Bradstreet were just DOING THEIR JOB. But from where I’m sitting, their systems and processes suck. I felt thoroughly dehumanised throughout the whole thing. Stalked, even.

I’m probably being oversensitive, but I didn’t like feeling like I’m being treated like subhuman scum. Not a debt dodger. Not even a legitimately decent person who’d fallen on hard times and fallen behind. I was literally someone stuck with a mess because someone in a big agency made a mistake. It’s scary how little power individuals actually have and how hard it is to sort things out that other people have screwed up. Here’s another story from a fellow Kiwi in that vein.

Have you ever had to sort out a mistake on your credit report or deal with debt collectors?

Disease Called Debt

Life with a mortgage (is surprisingly sweet)

Life with a mortgage is pretty sweet

Living with a mortgage ain’t half bad.

My contents insurance, which WAS around $1200 a year when I was renting, plunged to about $400 when I bought my house. Car insurance decreased by a few bucks too. Unexpected fringe benefits of home ownership! My jaw literally dropped when I heard the new figure and I had to ask the rep to repeat it back to me.

My house insurance is about $1250 a year. And since I got a $1200 cash gift from my new bank when I confirmed my mortgage, it’s basically free for the first year.

Council rates (the equivalent of property taxes in some of your countries) are pretty darn affordable. Mine are just under $1500 a year. This is typical for houses in this range; when house hunting I saw probably up to a $500 variation in annual rates between all the properties, based on their value.

And YES, before all you (non NZ) lovers of renting jump in, I’m prepared for the costs of maintenance – I will be referring back to my pre-purchase house inspection report plenty over the coming years, which was brimming with recommendations around everything from insulation to safety glass.

Replacing the deck and repainting the roof will probably be the priorities – but a new kitchen just might come first. There’s no rangehood, no splashback (both noted in the report as matters to remedy) and everything just generally needs an overhaul. Might even knock through a wall and make the whole living and kitchen area open-plan with an island.

How much am I paying?

My 30-year mortgage is structured in three parts. Here’s what it’s costing me per fortnight:

  • $77.83 ($30,000 floating loan @ 5.29% – was 5.44% at drawdown but rates dropped since)
  • $492.24 ($215,000 fixed loan for 2 years @ 4.35%)
  • $474.30 ($200,000 fixed loan for 3 years @ 4.65%)

So I’m paying the bank $1044.37 every fortnight, plus I’m also repaying my family at $200 on top of that: $1244.37 all up.

Thus far I’ve also knocked another $3,000 straight off the principal with extra lump sum payments but now I need to turn my attention to a few other financial priorities.

Mortgages in NZ

So, if any of that sounds weird, here’s a simple intro to mortgage options in NZ.

Or if you’re not much of a video person, let me try to run you through how things work here.

Fixed vs floating: There are fixed mortgage rates and floating (variable) mortgage rates. Fixed rates are typically lower.

The minimum term you can fix for here is generally 6 months and the maximum 5 years. Lots of people (like me) split up their mortgage into a few separate loans, some floating, some fixed. Floating allows you to focus on repaying the loan without penalties, while fixed gives you some certainty around rates (but with less repayment flexibility). And thus, a combo can offer the best of both.

Then there are a few more types of mortgage accounts available with floating rates:

Revolving credit loans are basically a giant overdraft, with one account acting as your loan, chequeing and saving account all in one. Your pay goes straight into the account and the idea is to leave the money sitting there as long as possible (eg putting your expenses on a credit card and paying them off at the end of the month). By keeping the account balance (and thus, loan balance) as low as possible at any time, you save on interest because the bank calculates interest daily.

Obviously this requires discipline and organisation, though you may be able to set it up so that your credit limit reduces over time, making it easier to stay on top of things and ensure you’re making progress. When it comes to refinance/rollover time I imagine I’ll choose revolving credit for part of my mortgage.

Similar but different, an offset mortgage is linked to your other accounts with the bank. Your mortgage interest is offset by the amount you have in your other accounts. For example, if your mortgage balance was $500,000 and you had $20,000 between your savings and chequing accounts, you would only be paying interest on $480,000. But compared to revolving credit, offsetting is not offered by as many banks.

And in case you missed it: my step by step guide to actually buying a dang house, from getting preapproved to settlement day.

5 ways I’m accidentally frugal

5 ways I save money by accident

I have a penchant for good food and travel, but by happy accident, there are lots of ways in which I manage to save money with zero effort.

I don’t really drink … anything

Alcohol, coffee and soft drinks don’t really agree with my digestive system. I don’t know how much NOT buying any of these on the regular saves me but I bet it’s a reasonable amount. Plus I’m a lightweight so if I do drink one is always enough.

I’m unfashionable

I have no sense of fashion nor interest in it. Every so often I go through a spurt of wanting to be stylish and plan to start accessorising and planning outfits more carefully – which never lasts very long before I revert to my lazy ways. There’s no point trying to fight my inner nature.

I’m kind of antisocial

I have friends, I swear, but I’m hardly swamped with invitations out every week. (Years ago I figured I needed to start making new adult friends and swore to start going to Meetups: then I realised I find it hard enough to keep up with my small circle and if I can’t even maintain my current friendships I shouldn’t add anymore.) My social calendar is sparse and I like it that way. More time to cuddle up with the dog and a book at my cosy place.

I love carbs

Seriously, I could basically live off potatoes, pasta, bread and rice.

I hate driving. And parking

Having a car is a necessity here but it’s also expensive! There’s no reason for us to have two vehicles and being a one car household definitely saves money. It’s occasionally inconvenient but those instances are rare.

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Femme Frugality*

How To Worry Less About Money: 3 things I took away

The most refreshing thing about How to Worry Less About Money is the author’s unflinching observation of how money affects relationships. In this book, John Armstrong relates this back to his own marriage.

“My own experience is that money worries can cause terrible conflicts in relationships. I fear I have damaged Helen’s life by not making more money. And there are stylistic clashes: I like being lavish; she’s much more restrained. For instance, I like the idea of going to fancy restaurants; she prefers the modest family-run place round the corner, or chicken soup at home. (And this is all the harder to deal with because our earnings point in the opposite directions to these personal tastes).”
Well, I’m the Helen in my life, and I can vouch for the fact that I have felt resentful many a time. I wish that weren’t true, but I am human, and perhaps not always a very good one. This is us, down to a T, especially the incongruence between tastes and earnings.  I would be curious to hear Helen’s viewpoint.

Money and marriage

Armstrong points out that in the world of Jane Austen, having enough money is taken very seriously (and rightly so!) as a necessary condition of happy marriage. Money reduces the fragility of a relationship, and makes people more relaxed. Money buys luxury, privacy and  stimulation. Money is for some people an aphrodisiac.

All of these things resonate so hard (perhaps not exactly the last one, but financial stress is a huge turn off and therefore lack of money is definitely a turn off).

Alas, there are no true solutions offered up, despite the practical promise offered in the title. This is a philosophical read about how we think about money, relate to it, the space it occupies in our minds and lives.

It’s a book about money worries, as opposed to money troubles.

Money troubles vs money worries

Money troubles, Armstrong contends, are urgent. They call for direct action and can only be resolved in one of two ways: either you gain access to more money or you go without something else.

Money worries, conversely, are about imagination and motions, not just what is happening now. Money worries often say more about the worrier than the world. They’re about what’s going on in your head not just in your bank account.

The meaning of money

When you strip money right back to the fundamentals, it is just a resource – a means of exchange.

“In other words money is an instrument … Ultimately the task in life is to translate efforts and activities that are inherently worthwhile into possessions and experiences that are themselves of lasting and true value.

“That is the ideal money cycle. Our relationship with money becomes unhealthy when we remove it from this cycle. That happens when we stop seeing money as potential possessions and experiences – but rather see possessions and experiences as potential money.”

We’re all bombarded these days with the reminder to DO WHAT YOU LOVE. Armstrong acknowledges that we need to make enough money to meet our needs and we also need to do things that help us make sense of who we are and contribute to collective good.

You can escape by not caring about meaning. And you can escape by not caring about having much money.  But a lot of people care about both.”

* * *

If you know roughly what to expect going in, this is a great read. I related to so much of it, I was constantly nodding along and found myself bookmarking what seemed like every other page.

If you’ve read it, what did you think?

Share the Wealth Sunday

The power of extra mortgage payments

Lots of personal finance bloggers, especially after becoming debt-free, say saving is boring.

I don’t get it.

I love watching my money grow and the numbers tick up. There’s nothing better – except cheesecake, maybe.

I’m a bit of a hoarder in real life, so maybe it’s not surprising that I also like to hoard money (real or otherwise – sometimes I think wistfully of all the Neopoints I had banked back in the day).

I was so resentful of my consumer debt, basically because I didn’t actually get anything out of it. It was all incurred while supporting an unemployed partner – less consumer debt and more keeping up with bills, really.

But now that I have a mortgage, I just might be changing my tune. It’s a different story as I deliberately took on this debt, plus the payoff is so much bigger.

I don’t mind my mortgage as I wouldn’t have a home without it, but I’d like to minimise the massive effect of compounding interest working against me.

The $3,000 in extra lump sum payments I’ve made? Apparently saves over $9,000 in interest over the long run.

I get it now…!